What are business gas rates?
Business gas rates are what you pay for the gas your business uses, and they usually come in two parts. The unit rate is the price for each kilowatt hour (kWh) of gas. The standing charge is a fixed amount you pay whether you use gas that day or not.
Ofgem, the energy regulator, says fixed rate contracts fix the unit rates and standing charges for the whole length of the contract. That means the cost per kWh stays the same whatever happens to wholesale prices. Its guide to getting a business energy contract is the source for the rules in this post.
Business gas rates are not published in one neat table, the way the household price cap is. Each supplier quotes you, and the quote depends on your business. That is why two shops on the same street can be quoted different rates.
It is also why doing nothing is costly. If your contract rolls over or ends and you say nothing, the rate you land on may not be the one you would have chosen.
What is a good business gas rate?
There is no single good number. A good business gas rate is one that is competitive for your usage, your contract length and the date you sign, and that comes with terms you understand. Any article that promises a magic pence per kWh for everyone is guessing.
Ofgem says the type of contract you can get usually depends on the size of your business and how much energy you use. It also lists what to know before you agree: the type of contract, how long it runs, any fees, what protections you have and whether broker fees or commissions are included in the price.
So compare like with like. Put the quotes side by side with the same term, the same estimated annual usage and the same payment terms. Check the standing charge as well as the unit rate, because a low unit rate with a high standing charge can come out differently depending on how much gas you use.
Key takeaways on business gas rates
- Look at both the unit rate and the standing charge.
- Compare quotes with the same term and the same estimated usage.
- Ask whether broker fees or commission are built into the price.
- Find out what happens at the end of the contract before you sign.
Are fixed or variable business gas rates better?
Neither is better for everyone. Fixed business gas rates give you certainty, because Ofgem says the unit rates and standing charges stay the same for the term. Variable rates can go up or down during the contract, and Ofgem says that may happen when wholesale market prices change.
If your business needs to know its costs for the year, a fixed contract is easier to plan around. If you are happy to take some price movement, a variable contract is an option, but you are accepting that the rate can rise.
Ofgem also describes flexible contracts, sometimes called structured contracts, which are suitable for large businesses that use a lot of energy. They let companies buy energy in smaller portions when market conditions are better. Most small firms will not need one.
Our guide to fixed price business energy goes through what happens when a fixed tariff ends.
What happens to your business gas rates when a contract ends?
If you do not agree a new deal, your rates can change for the worse. Ofgem says some suppliers move you onto out of contract rates when a fixed term ends without a new deal, and that these rates are usually more expensive than fixed term contracts.
Some contracts also roll over. Ofgem says they renew automatically for a fixed term, usually 12 months, and the new arrangement may be on a higher rate. Deemed rates, which apply when you move into premises without arranging a contract, are usually higher than negotiated rates too.
The fix is dull and effective: put the end date in the diary. Our guide to business energy renewal checks shows what to look at before the date arrives.
Are you a microbusiness, and does it matter?
It matters, because microbusinesses get extra protections on business gas rates and renewals. Ofgem says you qualify with fewer than 10 employees and an annual turnover or balance sheet total of no more than £2 million. You can also qualify if you use up to 293,000 kWh of gas a year.
If you do qualify, Ofgem says your supplier must give you clear information about your contract and information about renewal prices before the contract ends. On evergreen contracts only, termination notice is limited to 30 days, and your supplier must acknowledge a request to end the contract within 5 working days.
Small businesses and large businesses sit in different bands, and some suppliers use either business size or annual consumption to decide which protections apply. Ask your supplier which applies to you, and what that means for your business gas rates at renewal.
Should you use a broker or a comparison site?
Either can work, as long as you know how they are paid. Ofgem says brokers charge for their services. Some charge an upfront fee, but most are paid a commission by the supplier you choose, and those brokers must belong to an approved redress scheme.
It also says price comparison websites compare contracts from different suppliers, and you should check whether the site covers the whole market or a selection, and whether it earns commission. Ofgem adds that there is no cooling off period after you agree your contract, so be sure before you sign.
When you are ready, a comparison takes minutes and shows you the market for your usage. Our guide to business energy charges helps you read what is on the quote.
Frequently asked questions about business gas rates
- What do business gas rates include?
- Business gas rates usually include a unit rate for each kWh and a standing charge. Ofgem says fixed rate contracts fix both for the length of the contract.
- Why are out of contract business gas rates higher?
- Ofgem says out of contract rates are usually more expensive than fixed term contracts. They apply if a fixed term ends and you have not agreed a new deal.
- What counts as a microbusiness for gas?
- Ofgem says a microbusiness has fewer than 10 employees and a turnover or balance sheet total of no more than £2 million, or uses up to 293,000 kWh of gas a year.
- Is there a cooling off period on a business energy contract?
- Ofgem says there is no cooling off period after you agree your contract, so check the terms before you sign.
- Do energy brokers charge fees?
- Ofgem says brokers charge for their services. Some charge an upfront fee, but most are paid a commission by the supplier you choose.
